Assessing Growth Opportunities for U.S. Red Meat in South Africa

Africa has the world’s youngest population, and in the next three decades it is expected to nearly double – reaching 2.5 billion by 2050. Africa’s middle class is also growing rapidly, which greatly increases demand for red meat. USMEF has heightened its focus on Africa, especially as U.S. meat has gained better access to selected markets. This includes reopening of South Africa to U.S. beef and pork in 2016.

Earlier this summer, USMEF Technical Services Manager Cheyenne McEndaffer and Monty Brown, USMEF representative in Europe and Africa, visited South Africa to examine export opportunities for U.S. beef and pork, assess the competitive landscape of the South African market and identify and address market access barriers for U.S. products.

While some U.S. products – especially beef livers – have gained considerable traction in the market, McEndaffer sees ample opportunities for further growth if regulatory obstacles can be reduced or eliminated.

“Not long after the market opened, South Africa quickly jumped to our second-largest beef liver market,” McEndaffer explained. “It’s still small compared to our top liver importer, Egypt, but USMEF is always looking for ways to diversify markets for variety meat and there is a lot of demand in South Africa for offal items, including livers, tripe and kidneys.”

She notes that U.S. beef muscle cuts are also achieving some success in South Africa.

“South Africans love meat and they especially love high-quality meat on the bone,” McEndaffer said. “South Africa is a big domestic beef producer and they slaughter very young, so the product is very tender and lean. But it doesn’t have the marbling that U.S. beef does, so we see opportunities for U.S. middle meats in high-end steakhouses. These cuts have already established a presence in the major city centers’ restaurant sector, but we’re also looking at opportunities for items such as short ribs. Beef trimmings also have potential for use in South Africa’s large meat processing sector.

In the first half of 2018, beef and beef variety meat exports to South Africa totaled 7,804 metric tons (mt), down slightly from the same period last year. But with beef muscle cuts increasing significantly (1,261 mt, up 1,026 percent) from last year’s low volume, export value to South Africa increased more than 40 percent to $8.6 million. South Africa’s total imports were about 36,000 mt, meaning U.S. beef accounted for 22 percent of South Africa’s import volume, which is second to Australia (24 percent). Remaining market share is mostly divided among Namibia, Botswana, the European Union, New Zealand and Argentina.

Exporting pork to South Africa has proven more challenging, mainly due to technical restrictions.

“We still face some technical difficulties on the pork side from animal health-related restrictions on what we can or can’t send,” McEndaffer explained. “We do see a lot of buyer interest for pork offal, but unfortunately the U.S. does not have access for offal items. So USMEF is working with other trade associations to see if we can expand the range of eligible products. There is also still some confusion among U.S. exporters as to which cuts are eligible for retail and which must go directly for further processing, and some are concerned about product being rejected or delayed.”

South Africa produces some domestic pork but imports large volumes from Europe, especially Germany. Through the first half of 2018, South Africa imported 20,349 mt of pork (up 9 percent year-over-year) valued at $43 million (down slightly), with German pork capturing nearly 50 percent market share, followed by Brazil (18 percent) and Spain (16 percent). Importers are concerned about the spread of African swine fever (ASF) in Europe, which would likely result in South Africa suspending imports if ASF is detected in Germany.

“Every importer we spoke to asked about pork hearts, especially if the market would close to German pork,” McEndaffer said. “So that’s just one of the opportunities that could pay dividends if the U.S. can gain access for pork offal.”

Brazilian pork exporters have pursued the South African market more aggressively since Russia suspended imports of Brazilian pork and beef in December 2017. At that time, Russia was taking about 40 percent of Brazil’s total pork exports. But South African importers noted that Brazil’s nationwide truckers’ strike earlier this year, which had a significant impact on production and transportation of Brazilian meat, raised questions about its reliability as a supplier.

A deadly outbreak of listeria earlier this year has had a mixed impact on pork production and consumption in South Africa. The pork plant connected to the outbreak remains closed, and some upper-income consumers continue to shy away from pork. The outbreak hammered South Africa’s live hog prices, lowering the costs of raw materials and helping boost demand for processed pork products among lower-income shoppers. But the cost savings on domestic raw materials will be short-lived, as the hog price crash drove some small producers out of business.

U.S. tomahawk steaks on display at a retail outlet in South Africa

Joined by Pretoria-based staff from the USDA Foreign Agricultural Service (FAS), McEndaffer and Brown met with officials from South Africa’s Department of Agriculture, Forestry and Fisheries (DAFF) to discuss issues that may be inhibiting U.S. red meat exports due to lack of clarity about product and plant eligibility, documentation requirements or export/import procedures. Microbiological testing is also a big factor for importers clearing product at South African ports. The frequency of testing varies greatly between ports, as does the corrective actions requested. USMEF has followed this issue since the market opening and continues to gather information to pass on to exporters to ensure they are aware of such testing and the frequent changes to the testing protocol.

Packaging is also a contentious issue in South Africa, as many containers are stopped at the port of entry due to packaging that is deemed “inferior.”

“The magic words in South Africa seem to be ‘wrapped and packaged,’ which is terminology widely used in the European Union,” Brown noted. “We are seeing stepped-up enforcement when pallets of product have insufficient external wrapping to prevent contamination. Local importers are resorting to poly blocks wrapped in a large plastic sheet, or bags placed inside cardboard jumble bins, in order to overcome this problem.”

USMEF staff found the meeting with South African officials to be very constructive.

“DAFF listened to our questions and offered guidance on the steps U.S. exporters can take to help ensure smoother entry of red meat products into South Africa,” McEndaffer said. “USMEF has shared this guidance with our members, and we are hoping that more of them will take an active interest in the market, now that they have greater insight on how to comply with South Africa’s requirements.”

Despite ongoing obstacles and robust competition, USMEF sees strong potential in the South African market, especially if remaining trade barriers can be successfully addressed. U.S. companies not only see South Africa as a promising destination for red meat products, but also an excellent base for a regional presence.

“In the past two years, three large U.S. trading companies have established an office in South Africa,” Brown noted. “They are finding it to be an attractive location from which to service the rest of Sub-Saharan Africa.”

Exporters with technical or regulatory questions about the South African market may email Cheyenne McEndaffer. For questions about USMEF promotional activities or emerging export opportunities, contact Monty Brown.